Saint Gobain Galss India Ltd., Chennai V. ACIT LTU-2, CHENNAI

ITA 80/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0038 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 05-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Opportunity of being heard; Retrospective amendment; Bad and doubtful debts
• Section: 143(3); 115JB

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NO. 80/CHNY/2018 /ASSESSMENT YEAR: 2004-05 M/S. SAINT GOBAIN INDIA PRIVATE LIMITED, LEVEL 7, SIGAPI ACHI BUILDING, 18/3, RUKMANI LAKSHMIPATHY ROAD, CHENNAI 600 008. [PAN:AABCS4338M] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT 2, NUNGAMBAKKAM, CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI M. SRINIVASA RAO, CIT / DATE OF HEARING : 31.01.2019 /DATE OF PRONOUNCEMENT : 27.03.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 7, CHENNAI, DATED 31.10.2017 RELEVANT TO THE ASSESSMENT YEAR 2004-05. THE EFFECTIVE GROUNDS RAISED IN THE APPEAL OF THE ASSESSEE ARE THAT (I) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF AMOUNTING TO .73,76,292/- AND (II) THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF .1,69,74,197/- WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961 [ACT IN SHORT]. I.T.A. NO. 80/CHNY/18 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS CARRYING ON THE BUSINESS OF MANUFACTURE AND SALE OF GLASS. THE ASSESSEE FURNISHED THE RETURN OF INCOME ON 29.10.2004 DECLARING AN INCOME OF .21,16,40,901/- UNDER NORMAL COMPUTATION AND UNDER SECTION 115JB AT .45,85,16,388/-. THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 29.12.2006 ASSESSING THE INCOME AS NIL UNDER NORMAL COMPUTATION AND UNDER SECTION 115JB AT .46,99,12,500/- BY MAKING CERTAIN DISALLOWANCES/ADJUSTMENTS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER VERIFICATION OF THE DETAILS FURNISHED BY THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT OUT OF THE BAD DEBTS CLAIM OF .73,76,292/-, AN AMOUNT OF .10,06,840/- STANDS IN THE NAME OF SAINT GOBAIN SEKURIT INDIA LTD., A SUBSIDIARY OF THE ASSESSEE COMPANY. SINCE THE DEBTS OWNED BY A SUBSIDIARY COMPANY CANNOT BE CALLED AS BAD BY ANY STANDARD, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF BAD DEBT CLAIMED OF .73,76,292/-. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE DISALLOWANCE OF BAD DEBTS, IT WAS THE SUBMISSION OF THE LD. AR THAT THE ASSESSEE CLAIMED BAD DEBTS WRITTEN OFF AT .73,76,292/- AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. FURTHER, THE LD. AR RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED V. CIT I.T.A. NO. 80/CHNY/18 3 323 ITR 397 IN SUPPORT OF THEIR CONTENTION THAT THE CLAIM OF BAD DEBTS UNDER SECTION 36(1)(VII) IS ALLOWABLE IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS BECOME IRRECOVERABLE. THEREFORE, THE LD. AR HAS SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CLAIM BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. 5. PER CONTRA, THE LD. DR HAS SUBMITS THAT THE ASSESSEE COMPANY CLAIMED BAD DEBTS ON BREAKAGE ETC. IS NOT ADMISSIBLE BECAUSE IN THE BOOKS, ON PERUSAL OF TRIAL BALANCE UNDER HEAD SALES, GLASS BREAKAGE CREDIT NOTE FOR .3,45,80,017/98 AND SHORTAGE OF .1,50,034/52 AND QUALITY RELATED CREDIT NOTES .86,54,401/41 HAS ALREADY BEEN DEBITED. HE FURTHER SUBMITS THAT THE ASSESSEE HAS SEPARATELY CLAIMED EXPENSES FOR BREAKAGE/SHORTAGE AND QUALITY RELATED CREDIT NOTES. IT WAS FURTHER SUBMISSION OF THE LD. DR THAT OUT OF THE BAD DEBITS CLAIM OF .73,76,292/-, AN AMOUNT OF .10,06,840/- STANDS IN THE NAME OF M/S. SAINT GOBAIN SEKURIT INDIA LTD. WHICH IS A SUBSIDIARY COMPANY OF ASSESSEE COMPANY. IN THE ABSENCE OF EVIDENCE IN THIS REGARD THE CLAIM OF BAD DEBT VIS--VIS ITS OWN SUBSIDIARY COMPANY IS UNTENABLE. THEREFORE, THE ORDER PASSED BY THE LD. CIT(A) SHOULD BE CONFIRMED. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER MADE THE OBSERVATIONS THAT THE CLAIM OF BAD DEBTS OF THE ASSESSEE IS I.T.A. NO. 80/CHNY/18 4 NOT ACTUALLY BAD DEBT, BUT, DUE TO GLASS BREAKAGE, ETC. IT WAS THE CONTENTION OF THE LD. COUNSEL THAT ALL THE DEBTS ARE BAD DEBTS AND WRITTEN OFF IN THE BOOKS OF THE ASSESSEE. HOWEVER, THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO SHOW THAT ALL THESE DEBTS ARE BAD DEBTS AND NOT BECAUSE OF BREAKAGE, DAMAGE, ETC. IN THE ABSENCE OF SUCH EVIDENCE, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE WHETHER IT IS ACTUALLY BAD DEBTS OR IT IS DUE TO BREAKAGE OR DAMAGE OF GLASS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO THE CONFIRMATION OF ADDITION OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF .1,69,74,197/- WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT THE ASSESSEE MADE PROVISION FOR THE YEAR ENDING 2004 AND THAT THE SAME BEING ONLY A DEBT AND NOT AN UNASCERTAINED LIABILITY, HAD NOT BEEN ADDED IN THE COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT. IT WAS FURTHER SUBMISSION THAT THE CLAUSE (I) TO EXPLANATION (1) TO SECTION 115JB OF THE ACT HAS BEEN INSERTED VIDE FINANCE ACT, 2009 AND THE SAID PROVISION DID NOT EXIST WHILE FILING THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. I.T.A. NO. 80/CHNY/18 5 8. ON APPEAL, BY REPRODUCING SECTION 115JB(2) OF THE ACT, CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB(2) WAS INSERTED BY FINANCE (NO. 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2001, THE LD. CIT(A) HELD THAT THE CONSTITUTIONAL VALIDITY OF INSERTION OF CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT W.R.E.F. 1.4.2001 WAS ALSO CONFIRMED BY THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF PEERLESS GENERAL FINANCE & INVESTMENT COMPANY LTD. V. DCIT IN WRIT PETITION NO. 1069 OF 2010 DATED 03.05.2017. ACCORDINGLY, THE LD. CIT(A) HELD THAT THE PROVISION FOR BAD DEBTS NEEDS TO BE ADDED BACK TO THE BOOK PROFIT AND CONFIRMED THE ADDITION OF PROVISION FOR BAD DEBTS MADE BY THE ASSESSING OFFICER. WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 27 TH MARCH, 2019 IN CHENNAI. SD/ - SD/ - (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 27.03.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.